Budget 2023: Will the old tax regime be discontinued?
Updated on: Apr 1st, 2024
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16 min read
Salaried taxpayers didn’t see many positive changes in the last few budgets, except for the optional new tax regime in the Budget 2020, which didn’t find favour. In Budget 2023, the main focus under personal taxation was on promoting the new tax regime. Of the five tax relief measures announced by Finance Minister Nirmala Sitharaman, four were specifically designed for the new regime. This shows that the government is encouraging more people to switch to the new regime. But does this call for the end of the old tax regime? No. The old tax regime will continue. Therefore, the taxpayers still have the option to stick with the old one.
Budget 2023 announcements for new tax regime
- In addition to individuals and HUF, the new tax regime is extended even to the Association of Persons (other than cooperative societies), Body of Individuals and Artificial Juridical persons
- By default, the taxpayers will now be under new tax regime. The old tax regime will not be discontinued. The taxpayers will have the option to continue with or opt-in for the old tax regime. They can switch between the tax regimes every year by filling up a form.
- The slab rates under the new tax regime are revised as under:
| Total Income | Rate of Tax |
| up to ₹3,00,000 | Nil |
| ₹3,00,001- ₹6,00,000 | 5% |
| ₹6,00,001- ₹9,00,000 | 10% |
| ₹9,00,001- ₹12,00,000 | 15% |
| ₹12,00,001- ₹15,00,000 | 20% |
| ₹15,00,001 and above | 30% |
- The new tax regime didn’t have many takers as the majority of exemptions and deductions had to be forgone. However, after Budget 2023, taxpayers will now be allowed to claim the following deductions:
- Standard deduction of ₹50,000 in case of salaried taxpayers.
- Standard deduction on family pension: 1/3rd or ₹15,000 whichever is lower.
- Contribution to Agniveer Corpus Fund in case of Agniveers shall be exempt from tax.
- Resident Individuals with an income up to ₹7,00,000 will not pay any tax. The rebate limit has been enhanced for the resident individuals.
- The surcharge rate for high net worth taxpayers with income more than Rs 5 crore will be reduced to 25%. Therefore, taxpayers with income more than Rs 2 crore will be required to pay a surcharge of 25% on the tax.
What exemptions and deductions are available under the new tax regime?
| Particulars | Old Tax Regime | New Tax regime |
| HRA Exemption | ✓ | X |
| Leave Travel Allowance (LTA) | ✓ | X |
| Other allowances including food allowance of Rs 50/meal subject to 2 meals a day | ✓ | X |
| Standard Deduction (Rs 50,000) | ✓ | ✓ |
| Entertainment Allowance Deduction and Professional Tax | ✓ | X |
| Perquisites for official purposes | ✓ | ✓ |
| Interest on Home Loan u/s 24b on self-occupied or vacant property | ✓ | X |
| Interest on Home Loan u/s 24b on let-out property | ✓ | ✓ |
| Deduction u/s 80C | ✓ | X |
| Employee's (own) contribution to NPS | ✓ | X |
| Employer's (own) contribution to NPS | ✓ | ✓ |
| 80D- medical insurance premium | ✓ | X |
| Disabled Individual - 80U | ✓ | X |
| Interest on education loan | ✓ | X |
| Interest on Electric vehicle loan | ✓ | X |
| Donation to Political party/trust etc | ✓ | X |
| Savings Bank Interest u/s 80TTA and 80TTB | ✓ | X |
| Gifts upto Rs 5,000 | ✓ | ✓ |
| Exemption on voluntary retirement 10(10C) | ✓ | ✓ |
| Exemption on gratuity u/s 10(10) | ✓ | ✓ |
| Exemption on Leave encashment u/s 10(10AA) | ✓ | ✓ |
| Daily Allowance | ✓ | ✓ |
| Transport Allowance for a specially-abled person | ✓ | ✓ |
| Conveyance Allowance | ✓ | ✓ |
Also Read
Old vs New Tax Regime
New Tax Regime Deductions Allowed, Exemption List & Benefits
Form 10-IEA: Option to Choose Old Tax Regime
Income Tax Changes From 1st April 2024
Frequently Asked Questions
Quick Summary
In Budget 2023, the government focused on promoting the new tax regime, while still allowing taxpayers to choose between the old and new regimes. New deductions and exemptions have been introduced for the new regime, including standard deduction for salaried taxpayers and reduced surcharge rates for high net worth individuals. Taxpayers can switch between regimes yearly. The new regime extends to various entities beyond Individuals and HUFs.
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